Bank of England launches bond-buying programme to prevent ‘material risk’ to UK financial stability
The Bank of England has launched a temporary bond-buying programme as it takes emergency action to prevent “material risk” to UK financial stability.
It revealed that it would buy as many long-dated government bonds as needed between now and 14th October in a bid to stabilise financial markets in the wake of the mayhem that followed the government’s mini-budget last Friday.
In addition to the plunge in the value of the pound, it has also seen investors demand a greater rate of return for UK government bonds – essentially IOUs.
That is because the level of borrowing required to fund the government giveaway, including tax cuts and energy aid for households and businesses, shocked the market which immediately questioned the sustainability of the public finances.
What this action is aimed at doing is tackling consequences of rising yields, in this instance a liquidity crunch facing pension funds.
WHY THE BANK OF ENGLAND HAS ACTED
There are some very, very specific reasons why the Bank of England is intervening in this particular asset class in long-dated gilts – that’s gilts of a 20 to 30 year duration.
It affects traditional pension funds where a retiree is guaranteed a certain payout at their retirement based on their final salary when they retire.
Now, a lot of these funds use long-dated gilts as part of their investments and what has been happening over recent days is a lot of the investment funds have been asking pension funds to post more collateral – to put up cash.
It has been reported in The Times that actually these cash calls have been running into tens of billions of pounds since the beginning of the week because of this spike in long-dated gilt yields.
That is why the Bank of England is specifically targeting that with this gilt intervention.
It is aimed at seeing off a crisis that’s potentially starting to emerge in pension funds.
The Bank said in a statement: “Were dysfunction in this (long-dated bond) market to continue or worsen, there would be a material risk to UK financial stability.
“This would lead to an unwarranted tightening of financing conditions and a reduction of the flow of credit to the real economy.”
The programme marked the Bank’s first policy intervention as it battles to bring down inflation and ease the cost of living crisis. Its chief economist signalled on Tuesday that a “significant” rise in Bank rate was also likely ahead.
The government’s growth plan is only seen as adding inflationary pressure to the economy, leaving it at loggerheads with the Bank’s mandate.
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‘Crisis’ already for Truss government
The Bank said the bond purchases, which would be fully covered by the Treasury in the event of any losses, would be sold back once market conditions had stabilised.
The announcement certainly had an immediate effect on the market.
Data showed that 30-year bond yields fell back to 4.3%, having risen to levels above 5% not seen since 2022 earlier in the day. There were similar falls for 20-year yields.
Those for ten-year bonds also fell back below 4% from 4.6%.
Stock markets, which had endured widespread falls Europe-wide amid recession fears, erased some of their losses.
The FTSE 100 had ben almost 2% down but was just 0.8% lower on the day just before 1pm.
The pound, however, was a cent and a half down versus the dollar to stand at $1.0578 and a cent lower against the euro.
The single European currency was also suffering against a resurgent US currency.
In addition to its bond-buying action, the Bank said it would postpone the start of its efforts to unwind the sale of bonds it acquired through financial crisis and COVID crisis era quantitative easing.
The Bank had planned to reduce its £838bn of gilt holdings by £80bn over the next year.
Neil Wilson, chief markets analyst at Markets.com, said the Bank’s move followed evidence of “severe liquidity stress”.
This would have been particularly evident for pension funds who have faced demands for additional cash to cover off rising yields.
“The question is whether (this Bank action) acts to stabilise longer-term or if the market retests the Bank’s resolve”, he wrote.
“We’re now seeing the Bank go toe-to-toe with the market and this might not lead to any decrease in volatility”, he warned.
Sir Keir Starmer has joined other European leaders in Kyiv to press Russia to agree an unconditional 30-day ceasefire.
The prime minister is attending the summit alongside French President Emmanuel Macron, recently-elected German Chancellor Friedrich Merz and Polish Prime Minister Donald Tusk.
It is the first time the leaders of the four countries have travelled to Ukraine at the same time – arriving in the capital by train – with their meeting hosted by President Volodymyr Zelenskyy.
Sir Keir Starmer, Emmanuel Macron and Friedrich Merz travelling in the saloon car of a special train to Kyiv. Pic: Reuters
Leaders arrive in Kyiv by train. Pic: PA
It comes after Donald Trump called for “ideally” a 30-day ceasefire between Kyiv and Moscow, and warned that if any pause in the fighting is not respected “the US and its partners will impose further sanctions”.
Security and defence analyst Michael Clarke told Sky News presenter Samantha Washington the European leaders are “rowing in behind” the US president, who referred to his “European allies” for the first time in this context in a post on his Truth Social platform.
“So this meeting is all about heaping pressure on the Russians to go along with the American proposal,” he said.
“It’s the closest the Europeans and the US have been for about three months on this issue.”
Sir Keir Starmer, Volodymyr Zelenskyy and Emmanuel Macron among world leaders in Kyiv. Pic: AP
Trump calls for ceasefire. Pic: Truth Social
Ukraine’s foreign minister Andrii Sybiha said Ukraine and its allies are ready for a “full, unconditional ceasefire” for at least 30 days starting on Monday.
Ahead of the meeting on Saturday, Sir Keir, Mr Macron, Mr Tusk and Mr Merz released a joint statement.
European leaders show solidarity – but await Trump’s backing
The hope is Russia’s unilateral ceasefire, such as it’s worth, can be extended for a month to give peace a chance.
But ahead of the meeting, Ukrainian sources told Sky News they are still waiting for President Donald Trump to put his full weight behind the idea.
The US leader has said a 30-day ceasefire would be ideal, but has shown no willingness yet for putting pressure on Russian president Vladimir Putin to agree.
The Russians say a ceasefire can only come after a peace deal can be reached.
European allies are still putting their hopes in a negotiated end to the war despite Moscow’s intransigence and President Trump’s apparent one-sided approach favouring Russia.
Ukrainians would prefer to be given enough economic and military support to secure victory.
But in over three years, despite its massive economic superiority to Russia and its access to more advanced military technology, Europe has not found the political will to give Kyiv the means to win.
Until they do, Vladimir Putin may decide it is still worth pursuing this war despite its massive cost in men and materiel on both sides.
“We reiterate our backing for President Trump’s calls for a peace deal and call on Russia to stop obstructing efforts to secure an enduring peace,” they said.
“Alongside the US, we call on Russia to agree a full and unconditional 30-day ceasefire to create the space for talks on a just and lasting peace.”
Sir Keir and Volodymyr Zelenskyy during a meeting in March. Pic: AP
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The leaders said they were “ready to support peace talks as soon as possible”.
But they warned that they would continue to “ratchet up pressure on Russia’s war machine” until Moscow agrees to a lasting ceasefire.
“We are clear the bloodshed must end, Russia must stop its illegal invasion, and Ukraine must be able to prosper as a safe, secure and sovereign nation within its internationally recognised borders for generations to come,” their statement added.
“We will continue to increase our support for Ukraine.”
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The European leaders are set to visit the Maidan, a central square in Ukraine’s capital where flags represent those who died in the war.
They are also expected to host a virtual meeting for other leaders in the “coalition of the willing” to update them on progress towards a peacekeeping force.
Military officers from around 30 countries have been involved in drawing up plans for a coalition, which would provide a peacekeeping force in the event of a ceasefire being agreed between Russia and Ukraine.
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This force “would help regenerate Ukraine’s armed forces after any peace deal and strengthen confidence in any future peace”, according to Number 10.
A special constable has been jailed after taking pictures on his phone from bodycam footage showing a dying man.
Former police volunteer William Heggs, 23, was sentenced to 12 months’ imprisonment at Leicester Crown Court on Friday after showing the photos of victim William Harty, 28, to a female colleague and storing them on his Snapchat account.
Mr Harty was found seriously injured in a residential street in Leicester on 25 October 2021 and Heggs had attended the scene, helping with CPR before paramedics arrived.
Mr Harty died in hospital a day later and the man responsible for his injuries, his brother-in-law Martin Casey, was subsequently convicted of his manslaughter.
Heggs showed the pictures he had taken of bodycam footage of Mr Harty’s body to a Leicestershire Police constable, who reported Heggs and said she did not like seeing blood.
His phone was seized and officers discovered other photographs and video clips of bodyworn footage of incidents Heggs had attended on duty, including of a knife seizure, use of baton and pepper spray, and a man with an injured hand receiving first aid.
He also took pictures of a police computer screen, showing details of crimes and suspects, without consent.
Heggs stored the materials in a Snapchat folder and disclosed graphic details – most of which were not in the public domain – about the injuries to a woman who was killed in a road traffic collision he had attended, to a friend on the social media platform.
Heggs was suspended from the force in November 2021 and resigned in October 2024 before pleading guilty to 11 computer misuse and data protection offences this March.
William Harty’s widow Mandy Casey. Pic: PA
‘He has traumatised me’
Mr Harty’s widow, Mandy Casey, said in a victim impact statement read to the court that Heggs “took (her) husband’s dignity when he was most vulnerable”.
“You don’t take someone’s dignity and pride from them on their deathbed.”
She continued: “When I found out special constable Heggs had done this, I just wanted to ask why. He has traumatised me. I feel I will never know if he showed them to others.”
Ms Casey said she was still scared that photos of her husband’s body might appear on social media.
She added that she had lost trust in the police.
Public trust in police ‘significantly undermined’
Judge Timothy Spencer told Heggs, who has autism and ADHD, that he was “probably too immature to be working as a police officer” as he handed down the sentence.
He said Heggs had received “extensive training”, including on the importance of data protection, and knew he should only share materials for “a genuine policing purpose”.
Heggs’s actions had “significantly undermined” public trust and confidence in police, according to the judge.
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Malcolm McHaffie, from the Crown Prosecution Service, added: “William Heggs abused the public’s trust in the office he held as a special police constable.
“He violated the dignity of the deceased victims for no apparent reason other than what could be considered personal fascination and to gain credibility among his peers.”
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